India to remain fastest growing economy despite hits on growth rates: Ministry of Finance

Principal Economic Adviser in the Ministry of Finance, Sanjeev Sanyal said Saturday that the growth rate will be affected in next reading, but India would remain world's fastest-growing major economy, as he countered scepticism over GDP growth rate.

India's economy grew at 8.2 per cent in the April-June quarter of 2018-19 on the strong performance of manufacturing and agriculture sectors, increasing its lead over China to remain the world's fastest-growing major economy, according to government data released on Friday.

"The year-on-year growth rate will be affected by the rise in the base in the next reading, but will still be a very strong number and India will remain the world's fastest-growing major economy," Sanyal told PTI.

He was responding to a query about senior Congress leader P Chidambaram expressing scepticism over India's GDP growth prospects, saying it would "not be so favourable" in third and fourth quarters, despite the GDP growing at 8.2 per cent in the current fiscal's first quarter.

"Going forward, the base effect will not be so favourable. And when we reach Q3 and Q4, the rate of growth may decline and the annual growth rate may be more or less like last year's," Chidambaram had said on Twitter.

"Happy that the rate of growth has quickened, but look at the table once again. Q1 growth rate is based on the lowest base (5.6) in the last 8 quarters," he had tweeted.

Sanyal said the GDP growth rate of 8.2 per cent year-on-year for the first quarter of 2018-19 is an exceptionally strong growth performance, even after allowing for the base effect.

"The forecasts by almost all economists had already accounted for the dip in growth in the runup to GST introduction in July 2017," he said.

"Therefore, GDP growth rate of 8.2 per cent year-on-year for the first quarter of 2018-19 is an exceptionally strong growth performance, even after allowing for the base effect," Sanyal added.

Further countering Chidambaram's comments, former Infosys CFO and veteran IT investor M D Mohandas Pai said the base impact will be moderated by higher growth than estimated and growth will be higher than last year.

"Construction is doing well...Last year was not so good. Infrastructure spending will be up. Consumption is increasing due to an increase in income, low inflation, corporate Capex is going up.

So, the base impact will be moderated by higher growth than estimated. Growth will be higher than last year," he said.

Chidambaram is underestimating the growth, which is natural being in the opposition, Pai said.